Every good trader that I know has a different personality and therefore a different trading style. There are, however, some common traits that all the pro traders I know have in common. This is no coincidence. A huge part of their success is actually attributed to those traits!
There are unfortunately so many traders who struggle and who just can’t make it and stay profitable in the long term. I keep receiving emails from them almost every day. When I try to help them and find the reason why they fail, I usually find out that they lack some of the 4 essential traits the pros have.
Good news is that the traits the pro traders have aren’t that hard to learn and to implement in your everyday trading.
Let me now show you the traits that the pros have:
1. Hard rules
I like to compare traders to astronauts going to space. Before the astronauts venture into space they go through long and hard training. They are prepared and trained for every possible scenario that can happen during their mission. They know the exact steps they will need to do in every possible situation and they are trained so well that they do those steps automatically without thinking. Astronauts don’t improvise because they don’t have to. They know the exact steps to take in every possible scenario.
When I talked to the other pro traders I noticed that every one of them had a pretty long list of hard rules for every possible situation that can occur in their trading. They hold this list sacred and follow those rules accurately to the point.
Here are areas where you can create and apply your hard rules:
It is quite essential to have hard rules on how much money you risk per trade. My advice is to use the same position size for all your trades – that can be for example 2 % of your trading account risked per one intraday trade, 1 % for a reversal trade and 3 % for a swing trade. I absolutely don’t recommend risking too much on one trade. In fact, pro traders usually use pretty low risk per trade (percent-wise). This is partly because they have large trading accounts but it is also because they know that every strategy has its ups and downs and that they need to feel comfortable even when they are taking losses.
It is quite a common thing that pro traders risk low percentage whereas novice traders risk much more percent of their trading balance. Unfortunately, novice traders aren’t as experienced and disciplined as pro traders and they just blow their accounts because they used too much risk per trade.
So, if you are still learning how to trade and you have a small trading account, I suggest that you act like a pro trader and risk only small amounts of your trading capital. Maybe you won’t turbo boost your account, but you also won’t blow it! You also won’t start freaking out when you hit some losses and you will be able to think clearly.
You also don’t want to adjust your risk per trade based on your gut feeling. In other words – don’t risk more on some trades than on the others just because of your current mood or feeling. A gut feeling shouldn’t play any part in trading. Actually, a lot of newbies and even more experienced traders base some of their decisions on it. Pro traders never do that. Want to be a pro? Then have hard rules for your position sizes and never break them. Don’t listen to your emotions. At least not in trading.
Apart from adhering to strict money management rules, it is also very important to know when to enter your position, when to take profit, when to quit the trade prematurely and when to take a loss.
One of the worst things newbie traders do is that they enter their trades based on the spur of the moment. They, for example, see that the price is moving rapidly downwards. Without too much thinking they open a short position. They do it because they want to participate in the movement. What usually happens is that the price turns and those traders are caught in a bad trade they have no clue what to do with. This is just one example of why having strict rules for entering your trade is so important.
If you are trading using my Volume Profile strategies, then you should only enter your trade if there is Volume accumulation setup, Trend setup or Rejection setup. If you don’t see any of those setups then simply don’t trade.
Pro traders don’t force trades. Sometimes the markets are moving rapidly but still, there aren’t any trading setups to trade. In a situation like this people are often nervous because they feel like they are missing trading opportunities and that they are not making any money. Still, it is much better to wait for a good opportunity than to force trades. Forcing trades only leads to losses. That is a fact every pro trader will confirm. It is always better to have 1 good trade per day than to have 10 trades from which 7 are losers.
Another thing pros have in common is that they have hard rules for closing their positions. They never close their position just because of their gut feeling. They have their SL predetermined BEFORE they enter their trading position. Always.
Stop-loss doesn’t need to be at a specific place. I use for example Alternative SL which doesn’t work as a standard set-and-forget Stop-loss. Still, I know exactly what needs to happen before I quit my trade.
Here are common mistakes that newbie traders often do (and pros never do):
Closing winning trades too soon
The strongest emotions all traders face are “Fear” and “Greed”. When inexperienced traders are in an open position which is in green numbers (in an open profit), they often start to fear that the price will reverse and their position will end-up in a loss. For this reason, they quit their position prematurely in order to “take at least something”. The fear is even stronger if the strategy hasn’t been performing well recently. It is quite understandable, that after few losing trades the newbie trader wants to have a winning trade.
Unfortunately, closing winning trades too soon doesn’t really work too well because it bends your Risk to Reward Ratio (risk becomes much bigger than potential gain).
Pro traders don’t close their trades prematurely like this. They always follow their plan and they take their profits according to the plan which they made before they entered their trade. They don’t listen to emotions. Sure, they have them, but they are experienced enough to know that emotions don’t have any place in trading.
Holding losing trades too long
A pretty common thing for trading newbies is that they hold their losing positions too long while hoping for a miracle. Being unable to admit a loss is probably the most destructive thing a trader can do. This bad habit, combined with using too large positions is the main reason why most people blow their accounts
Pro traders know that even the best strategies have around 65-70 % win ration over the long run. They know that losses are part of the business and they are okay with taking them. Pro traders are able to take a SL and move to another trade with a clear head.
If you struggle with this and you feel that you aren’t able to handle taking a loss, then try lowering your trading positions a bit. This way your emotions won’t be that strong and you will be able to think more clearly.
2. Trading journal and statistics
Having a trading journal and a good statistics of your trading method is quite essential. In fact, I don’t think I have ever met a pro trader who wouldn’t have a trading journal and a good statistics.
The most useful thing about keeping a trading journal and statistics is that it tells you how your strategy performs over the long run. With a good statistics (which you derive from your journal) you know for example how the bad periods look like, how many consecutive losses you can expect and how big drawdowns your strategy made. If you find yourself having a tough time, you can look back into your statistics and see if such a thing happened in the past and how often such tough periods normally occur. Usually, you will find out that tough times sometimes happen and that there is nothing to be stressed about. The statistics will show you the bigger picture. If you find out that you are in the biggest drawdown your strategy ever experienced, then you can take some measures to dig out of the drawdown (I talk about those measures in my book).
Good statistics will also help you with optimization and implementing new ideas into your strategy. You will be able to tell which instruments perform the best, what the ideal Profit Target/Stop-loss is, what trading session works with your strategy best, etc…
Without a trading journal and good statistics, you are basically trading blind without any higher perspective. That’s why trading journal and statistics is so important and why all the pro traders have it.
3. The right mindset
Why there are so many really clever people and yet the percentage of successful traders is so low? The reason is psychology. If you want to be a pro you not only need to be clever but you also need to be able to handle the trading psychology. This is much harder than it sounds.
The first step to handle it is to start trading with real money. You need to feel the emotions you only get with real money. You won’t feel them with a demo account.
Ideally, trading should become a “boring routine” for you after some time. I am not kidding. When it becomes boring, then you are level-headed and you are able to trade without listening to your emotions. This is the goal you want to reach. The best pro traders I know seem so calm when trading that they look like they don’t really care. Don’t get me wrong. They DO care but they are able to put their emotions aside. They know that emotions don’t go well together with trading.
4. Having a good broker
A pro trader without the best quality broker would be like a Formula 1 racer not caring about the car he is driving. I said it many times and I never stop saying it: having a good broker as absolutely crucial. It really can make the difference between losing and being profitable.
Pro traders not only choose brokers who provide them with the lowest spreads and commissions but also brokers who are reputable and properly regulated. It is also important that the broker operates in a country with a solid jurisdiction. This is not a joke! So many times it happened that people weren’t able to withdraw their money from their trading account while the regulator and country government did nothing to help them.
So please don’t stick with a bad broker if there is a better broker around. Don’t be lazy. I know it takes some time to create a new account and to transfer your funds but it is worth it.
I personally trade with a broker called IC Markets. If you are looking for a good broker, then I recommend trading with this one.
For more thorough information about forex brokers, go and check out this video: Selecting The Right Forex Broker
I can guarantee you that if you stick to those four points and if you implement them into your trading, you will become much better trader than 80 % of the other retail traders around. Really. You would be surprised how many people won’t adopt those 4 traits into use just because they are lazy! So, if you want to trade like a pro trader, then start implementing the four traits into your trading right now.
Apart from the 4 traits that the pros have, you also need a reliable trading strategy to stick to. If you don’t have your own, why don’t you join my trading course and learn mine? You are very welcome to join us here: TD’s Pro Forex Course